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What is the Smart Grid?

Consumer Engagement

The Smart Grid offers many opportunities for consumers to save energy and for utilities to operate the grid in a more efficient, effective, and reliable way. But some features enabled by the Smart Grid also involve some sacrifice on the part of consumers, such as holding off on running your dishwasher until later in the evening.

A smart consumer will ask, "What's in it for me?" And the answer is: money. Specifically, participating in these programs will earn consumers extra savings on their energy bills. And for people who generate their own power, it can even result in something you never thought you would see: your utility could mail a check to you.

Many utilities already offer their customers ways to save extra money on their utility bills. For people with central air conditioning systems, for instance, some utilities will place a remote-control switch on the air conditioner to cycle the air conditioner on and off during times of peak power demand. In return, customers receive a credit on their electrical bill.

The Smart Grid will allow programs like these to operate in more sophisticated ways, resulting in greater energy savings with less inconvenience to businesses and homeowners. Some examples include time-of-use pricing, net metering, and compensation programs for plug-in electric vehicles (PEVs).

Time-of-Use Programs

One of the most important ways you can get involved with the Smart Grid is to take advantage of time-of-use programs when they become available in your area.

What is time-of-use pricing? Throughout the day, the demand for energy changes: it’s usually lowest in the middle of the night and highest from about noon to 9 p.m., but it can vary according to weather patterns and what’s happening during that time. Power plants and utilities have to work harder to meet the needs of electric consumers when the demand is highest.

During peak energy usage, utilities sometimes have to bring less-efficient—and often more-polluting—power generation facilities on line or purchase power from neighboring utilities at a higher cost. In the worst cases, utilities may have to institute rolling blackouts or reduce the voltage of the system, an approach called a "brownout."

Time-of-use rates encourage you to use energy when the demand is low by giving you a lower price for electricity during those times. Distributing the demand more evenly ensures that a steady and reliable stream of electricity is available for everyone.

Home energy management systems will help you to make the most of time-of-use pricing. Accessed with a home computer or hand-held mobile device, you will be able to see when prices are highest, which appliances use the most electricity, and even—at some point down the line—be alerted when prices go up, so you can remotely turn off unnecessary appliances until demand lowers and prices go back down.

Net Metering

For people that generate their own power at home—using a rooftop solar power system, for instance—net metering is an option already available in many states. In general, net metering involves the use of a meter that can record power flows back into the grid as a credit. Some mechanical meters will literally spin backwards, although today most utilities are using digital meters for net metering.

Today, most people with net-metered systems are allowed to accumulate credits for excess power generation—that is, power fed into the grid from their home power systems—on a monthly basis. At the end of the year, home power generators usually have the option of carrying over credits into the next year or receiving a check for their excess power generation. That's right, your utility can pay you for power.

The Smart Grid will enable enhancements to these net metering programs. For instance, a utility might pay more for customer-generated power during times of peak power demand, while paying less for off-peak power. Like time-of-use pricing, such a pricing structure will encourage home generators to minimize their energy use during times of peak demand so they can maximize the amount of power fed onto the grid.

Other Financial Incentives

The Smart Grid will open up countless new ways for you and your utility to interact on energy. Many of these new capabilities will offer energy savings to you, but some may also include minor sacrifices or inconveniences, and for those, utilities are likely to offer financial incentives to encourage you to participate.

For instance, smart appliances could offer countless subtle ways for utilities to shift electrical demand to off-peak hours. Your dishwasher could defer running until later in the evening, or your refrigerator could defer its defrost cycle. Your air conditioner could slightly extend its cycle time to help lower your power demand during peak hours. Unneeded lights or electrical devices could even power off.

For any such program, your utility will probably offer some financial incentive for your participation. The result could be a double savings for you: a direct energy savings on your electricity bill and the extra benefit of earning an incentive payment from your utility.

One future area of potential financial incentives involves the use of plug-in electric vehicles (PEVs) as sources of stored energy for the utility. If you own a PEV, your utility might pay you an incentive for occasionally drawing power from your battery pack. Because extra cycling of your battery pack could shorten its useful life (at least in today's battery packs), your utility could provide you with extra compensation to help account for the slight degradation in the useful service life of your batteries.

Overall, the Smart Grid will open the door to many new possibilities for utilities and their customers to reach agreements on ways to save energy. The financial incentives available could encourage a wide range of new consumer options. You may be willing to pay a bit extra for a smart appliance, for instance, if it can also become a new source of revenue for you. And utility incentives could also encourage you to install a home generation system, such as a small wind turbine or solar power system. The result is a win-win-win: a win for you, for your power provider, and for your community.